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Committee narrows surplus‑lines bill after debate over arbitration and residential carve‑out
Summary
House Bill 561, which would reaffirm surplus‑lines carriers' freedom of rate and form and permit negotiated arbitration clauses in private surplus‑lines contracts, was amended in committee to exempt ordinary residential consumers; supporters said the bill restores market certainty after a recent Supreme Court ruling, while opponents warned about
House Bill 561, sponsored in the House by Representative Furman, was reported with amendments after extended committee discussion about surplus‑lines insurance, arbitration clauses and the potential effect on residential policyholders.
Representative Furman told the Senate Insurance Committee the bill "reaffirms that surplus lines carriers have freedom of rate and form, including the ability to negotiate private contracts, and include arbitration clauses in their policies." He said the bill excludes public bodies such as parish or municipal entities and that the goal was to "ensure a healthy and viable surplus lines market."
Tom Clark, speaking "on behalf of Velocity, underwriters and insurers," told senators surplus lines are often used to insure risks that admitted carriers will not take and said recent court developments had "muddied the waters" for arbitration clauses. "We're trying to make sure that these companies can continue to do business in this state," he said, arguing arbitration clauses are an element of those negotiated contracts.
Adam Patrick of the Department of Insurance told the committee the bill does not explicitly limit coverage to commercial risks and that, prior to the Supreme Court decision, surplus lines carriers had long enjoyed rate and form freedom. Patrick said the issue raised concerns about residential customers and suggested bolstering notice language to inform insured parties that a surplus lines policy "may contain an arbitration clause which could ... be a waiver of certain very important rights." Several senators expressed concern about consumers being required to arbitrate disputes out of state. Senator DuPlessis, among others, pressed for a residential carve‑out to protect homeowners and small consumers who lack bargaining power.
Senator Plessis offered an amendment (amendment set 2069) that added language to limit the bill's arbitration‑related provisions to commercial insureds; the committee adopted the amendment without recorded opposition. Several industry groups signaled support after the amendment, including the Home Builders Association and other trade groups; Luke Williamson, a private homeowner, and Brian Katz of the Louisiana Association for Justice spoke in opposition before the residential carve‑out was adopted but indicated the amendment addressed their main concern.
After the amendment was adopted, Senator Plessis moved to report House Bill 561 with amendments. With no opposition voiced in committee, the bill was reported favorably with the commercial‑insured carve‑out in place.
Discussion vs. action: Much of the hearing consisted of questions about venue, bargaining power, and which classes of insureds would be affected. The committee recorded two formal actions: adoption of amendment set 2069 and a committee vote to report the amended bill favorably.
Next steps: The amended bill is reported to the Senate with an adopted amendment that narrows application to commercial insureds; sponsors and stakeholders said they will continue to negotiate language before floor consideration.
